What is excluded from 'Gross Sales' when calculating revenue for a Chocolate Fish Coffee franchise?

According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, 'Gross Sales' for calculating franchise fees excludes specific items. Gross Sales is defined as the total dollar amount of all sales generated through the Business, including payments for services or products sold, whether for cash or credit.

However, the following are specifically excluded from the Gross Sales calculation: (i) bona fide refunds to customers, (ii) sales taxes collected by the franchisee, (iii) sales of used equipment not in the ordinary course of business, and (iv) sales of prepaid cards or similar products. It is important to note that while the sale of prepaid cards is excluded, the redemption of these cards is included in Gross Sales.

For a prospective Chocolate Fish Coffee franchisee, understanding this definition is crucial because royalty fees and brand fund contributions are typically calculated as a percentage of Gross Sales. Accurately reporting Gross Sales, with the specified exclusions, will ensure compliance with the franchise agreement and avoid potential disputes with the franchisor. Franchisees should maintain meticulous records of refunds, sales taxes, and prepaid card transactions to facilitate accurate reporting.